Does Citadel’s Ken Griffin know something Wall Street doesn’t? He just increased his investment by 1,000% in an artificial intelligence stock that’s up 150% this year, but analysts now expect a decline

Ken Griffin has proven his ability to pick stock market winners. The billionaire founded Citadel in 1990, and Citadel has since become the most profitable hedge fund manager ever. Today, the $64 billion fund invests in a variety of stocks, including some of the tech giants that have led the S&P 500 to record levels this year.

Given Griffin’s stock picking successes, it’s no surprise that investors are watching Griffin’s every move in search of new and potentially profitable investment ideas. Recently, Griffin has taken a position that goes against the average view of Wall Street analysts. He increased his investment by 1,000% in an artificial intelligence (AI) stock that has soared this year, but analysts now predict it will fall by double digits. Does Griffin know something that Wall Street doesn’t? Let’s find out.

Ken Griffin’s AI bet

As mentioned, Griffin invests in a wide range of technology powerhouses, including top names like Microsoft, NvidiaAnd Amazonand this has given him access to one of the fastest growing fields today: AI. The AI ​​market is predicted to grow from its current value of $200 billion to $1 trillion by the end of this decade. If this happens, these early AI players and their investors could have a big win.

In a move that further raises his AI stakes, Griffin has increased his holdings Palantir Technologies (PLTR 2.28%) by more than 1,100% to 5,680,767 shares in the second quarter. This is how the average analyst opinion recommends holding the stock – and analysts predict that Palantir shares will fall 32% over the next twelve months. Palantir shares are up 150% this year.

It’s true that Palantir, which trades at a forward earnings estimate of 120x, has become pricey, even for a growth stock. For example, the stock’s valuation far exceeds that of Microsoft, Nvidia and Amazon. This is an element that has caused some analysts and investors to curb their optimism about the stock.

PLTR PE ratio (forward) data per YCharts

But it is important to look at the long-term picture, which extends over twelve months. The trends we see show that Palantir’s long-term earnings potential could be significant thanks to a key new growth driver: the commercial customer.

Palantir’s commercial customer growth

Palantir helps customers unify and use their data to make better business decisions or increase efficiency – often leading to massive cost savings and even game-changing steps. The company historically generated most of its revenue and growth from government contracts, but recently and along with its focus on AI, the commercial customer has emerged as key to growth.

For example, in the most recent quarter, the number of U.S. commercial customers increased 83% to nearly 300. That’s up from just fourteen U.S. commercial customers about four years ago. And revenue from these customers rose 55% to $159 million in the quarter. These companies are flocking to Palantir’s Artificial Intelligence Platform (AIP) – a system launched last year – and the company is even calling the demand “inexorable.”

All this helped Palantir generate $134 million in net profit in the quarter, the most profitable quarter in its two-decade history. While Palantir has been around for years, this newfound success in the commercial world, along with public company growth that continues to rise at double-digit rates, could lead to a very different revenue picture in the long run. So yes, the stock looks expensive today, but if earnings soar in a few years, investors who got in now won’t regret it.

Of course, Palantir stock won’t rise overnight after its performance so far this year. But given the company’s recent earnings performance and momentum in the commercial sector, there’s reason to be optimistic about the stock’s long-term prospects. This may be why Ken Griffin recently increased his stake in Palantir – which goes against average Wall Street opinion and could be on track for a big gain in the long term.